How do I budget my crowdfunding campaign?
The new person to the world of crowdfunding that has heard the hype about how millions of dollars are raised on Kickstarter or Indiegogo by shooting a really cool video and uploading it, they are in for a massive letdown. Although crowdfunding a project at first appears free, it most certainly is not. Like any other business venture there has to be capital investment, or as the old adage goes, “it takes money to make money” and it is no different for the crowdfunding space.
The platform might not charge you until you’re successful, but the consultant and marketing agency will charge and you will need these professionals to increase you chance of having a successful crowdfunding campaign. Rewards based campaigns have many moving parts and all of these areas are vital to a successful campaign and MUST be addressed in a comprehensive crowdfunding plan that includes a well researched budget.
If the project is more commercial in focus and the goal is to raise enough capital to pay for product development, the net profit can be as little as 10% of the total revenues. All of these cost must be planned and budgeted for in your comprehensive crowdfunding plan or these ugly surprises will derail your efforts at running a successful crowdfunding campaign to raise the need capital to fund your dream.
How much are you willing to invest to increase the chances of your dream being a success? We have broken the crowdfunding campaign down into three distinct phases that must be planned and budgeted for to be successful.
1) Pre-Launch: Which includes campaign pitch development, video production, website design, PR, advertising, and consultants fees. The typical pre-launch costs vary between 10-20% of the total funds raised. The pre-launch phase is often ignored and the result is usually a crowdfunding campaign nightmare and a financially unsuccessful project.
2) Campaign Management costs (for successful campaigns only) include the Crowdfunding Platform fee (4-8%), payment processing fees via credit card, PayPal or Amazon.com (2-4%) and additional ongoing advertising. Typical management costs vary between 6-12% of the total funds raised.
3) Post-Campaign activities that include delivery costs (for successful campaigns only) include the cost of manufacturing and delivering the product or reward to backer which is typically 20- 30% of the total funds raised.